Washington, D.C., March 2, 2001 – The Bush administration has floated the name of Otto Juan Reich
for possible nomination as Assistant Secretary of State for Latin American
Affairs (see Al Kamen, "In the Loop," The Washington Post, 15 February
2001). Mr. Reich served in the Reagan administration as assistant
administrator of the Agency for International Development (AID) from 1981
to 1983, then as the first director of the State Department's Office of
Public Diplomacy for Latin America and the Caribbean (S/LPD) from 1983
to 1986, and finally as ambassador to Venezuela.

Mr. Reich's tenure at the Office of Public Diplomacy generated major
controversy during the exposure of the Iran-contra scandal and left an
extensive document trail, some of the highlights of which are included
in this Briefing Book. For example:

The Comptroller-General of the U.S.,
a Republican appointee, found that some of the efforts of Mr. Reich's public
diplomacy office were "prohibited, covert propaganda activities," "beyond
the range of acceptable agency public information activities..." The
same September 30, 1987 letter concluded that Mr. Reich's office had violated
"a restriction on the State Department's annual appropriations prohibiting
the use of federal funds for publicity or propaganda purposes not authorized
by Congress." The letter also said, "We do not believe, however,
that available evidence will support a conclusion that the applicable antilobbying
statute has been violated."

The General Accounting Office in an October
30, 1987 letter and report found that Mr. Reich's office "generally
did not follow federal regulations governing contractual procedures" in
its contracting "with numerous individuals and several companies."
The GAO quoted Mr. Reich as saying "he was generally unfamiliar with the
details related to the office's contracting procedures. Instead he
relied on his staff as well as State's procurement office to ensure that
federal regulations were adhered to."

The bipartisan report of the Congressional
Iran-contra committees (November 1987, p. 34) found that "[i]n fact,
‘public diplomacy' turned out to mean public relations-lobbying, all at
taxpayers' expense." The committees concluded their discussion by
quoting the Comptroller-General's findings in the September 30, 1987 letter.
A detailed critique of the public diplomacy operation, written by Iran-contra
committee staff, was deleted from the Iran-contra report after heated partisan
debate (see Robert Parry and Peter Kornbluh, "Iran-Contra's Untold Story,"
Foreign Policy, No. 72, Fall 1988, pp. 3-30).

A staff report by the House Foreign Affairs
Committee (September 7, 1988) summarized various investigations of
Mr. Reich's office and concluded that "senior CIA officials with backgrounds
in covert operations, as well as military intelligence and psychological
operations specialists from the Department of Defense, were deeply involved
in establishing and participating in a domestic political and propaganda
operation run through an obscure bureau in the Department of State which
reported directly to the National Security Council rather than through
the normal State Department channels…. Through irregular sole-source, no-bid
contracts, S/LPD established and maintained a private network of individuals
and organizations whose activities were coordinated with, and sometimes
directed by, Col. Oliver North as well as officials of the NSC and S/LPD.
These private individuals and organizations raised and spent funds for
the purpose of influencing Congressional votes and U.S. domestic news media.
This network raised and funneled money to off-shore bank accounts in the
Cayman Islands or to the secret Lake Resources bank account in Switzerland
for disbursement at the direction of Oliver North. Almost all of
these activities were hidden from public view and many of the key individuals
involved were never questioned or interviewed by the Iran/Contra Committees."

Mr. Reich responded in detail to questioning by staff of the
Iran/Contra Committees in a formal deposition
on July 15, 1987. The full text of the 122-page deposition is
included here. Part of the questioning revolved around a lengthy
March
20, 1985 memo written by Oliver North to National Security Adviser Robert
McFarlane, providing "the chronology of events aimed at securing Congressional
approval for renewed support to the Nicaraguan Resistance Forces."
The chronology contains repeated listings of actions to be taken by "State/LPD
(Reich)"; however, Mr. Reich testified that he "never saw it as a tasking
memorandum" and that he was unaware that his contractors were involved
in lobbying efforts or ads targeted on specific members of Congress.
North's memo also referred to an advertisement ("53 cents per day supports
a freedom fighter") that was off-message; the text of the ad was attached
to Mr. Reich's deposition as an exhibit.

On March 12, 1985, one of Mr. Reich's staff, Daniel "Jake" Jacobowitz,
on detail from the U.S. Air Force, wrote a detailed "public
diplomacy action plan" that paralleled the North chronology, with candid
commentary about the lobbying campaign including a three-item list of audiences:
"U.S. Congress," "U.S. media," and "interest groups."